AO Smith Looks to Expand Market Presence Intends to Widen Products Portfolio for Indian Market

US water heating solutions major, AO Smith India Water Heating Pvt. Ltd. is planning to expand its products portfolio offerings in India. The company which commissioned its manufacturing set up near Bangalore during 2010 for producing water heater for residential usage will now be offering locally manufactured, large capacity water heaters and boilers for commercial usage. AO Smith is headquartered in Milwaukee US. The company manufactures residential and commercial water heaters and boilers with manufacturing operations based in US, Mexico, China, Canada, India and the Netherlands and 10 global engineering centers for products research and development.

Mentioning about the expansion plans of the company, Mr. Tamal Chaudhuri, MD, AO Smith India and Mr. David Warren, VP Emerging Technology and Market Development said, "our new higher capacity water heaters will find its usage in commercial buildings, hospitals, hotels and other commercial establishments. The products will be competitive to own and operate being more energy efficient and having extended life span than the contemporary product offerings."

AO Smith presently makes and markets 1,3,6,10,15,25,35 and 100 litres water heaters and heat pumps at its manufacturing near Bangalore. The new range of products to be offered by AO Smith will be electric heaters, heat pumps and gas heaters. "The high capacity heaters bearing capacities of 35,50,70 and 100 litres are presently imported from AO Smith's facility in US, Europe and China as semi knocked down units following which the heaters are assembled in India. This is given the present modest demand volumes of the products here. However, we expect to gain in volumes given the quality features of the products in terms of higher level of thermal efficiency, Mr. Chaudhuri said."

He said, "The unique feature of AO Smith's 6-100 litres water heaters which gives it an extended life is the glass coating and glass line in the interiors of the water heaters as compared to stainless steel and copper offered by other manufacturers. The glass line is fused with stainless steel at temperature of 800 degress. This allows the heaters to take upon hard water with high iron content in many Indian cities which causes harm to the interior surface of the heaters by formation of scale. It has a superior thermostat. In case a fault occurs and the water temperature exceeds the present temperature, the thermal cutout cuts off the power supply to guarantee safety. The water heaters have a high pressure withstanding capacity of 95 psi, which makes it suitable for highrise buildings. Besides, the heaters are aesthetically pleasing." AO Smith's instant 1-3 litres water heaters are made of stainless steel.

He informed, "Karnataka, Tamil Nadu, and Kerala are emerging and potential for branded water heating products as compared to North India. Being located in Bangalore which is also one of the potential demand markets for branded products, we will be able to effectively serve the new markets in South." The size of Indian residential and commercial water heaters is volumes terms is estimated to be about: 18.5 lakh units. In value terms, the size of the market is Rs. 750 crores. Major part of the demand is from new markets. Size of unbranded water heaters is estimated to be at 6 lakh units with Delhi and Northern India alone occupying size of 4.50 lakh units.

Facility Expansion

Mr. Chaudhuri said, "in order to expand our market presence, we are in the process of plant expansion by adding further 1,50,000 square feet by June 2013. The facility will produce new range of water heaters." He added, "currently, we produce 85% of products range for Indian market in India itself at our facility with other 15% products imported from Europe, US and China. With the expansion, we expect to produce 95% of our products in India locally."

The company aims to build up its market presence through adequate products support given by it and its channel partners. AO Smith has distribution agreement with Jaguar for selling its high end products. The company has set up a 24 hour call centre in Hyderabad to address service related issues of the customers. Mr. Chaudhuri said, "We have over 2000 sales outlets across India and is in the process of further expanding the same. We have our presence in 10 key markets and beyond in India. The markets have been segmented as A,B and C categories. Distribution of the products in the markets is met by AO Smith directly by itself through its own network in modern retail outlets and also through a mix of dealers and distributors. There are 32 product distributors appointed by the company for marketing its heaters. This includes dealers for electrical appliances, distributors for white goods, and sanitary ware dealers and up market retail outlets. Major volumes of business for AO Smith in India currently come from residential sales.

AO Smith which to localize 90% of its products in phases, in order to make them cost competitive, procures steel, the main raw materials for its heaters from JSW steel manufacturing facility at Bellary in Karnataka. This provides economies of scale in procuring the raw materials, allowing the company to have price advantage. Steel procured by AO Smith comes with a thickness of 2.5 meters for producing its water heaters.